Risk Management Techniques – Part 4 | Forex Chart Analysis

The USD/CAD chart is examined. A longer term time frame has been used as this can negate the short term volatility which would prevent opportunities in the market being noticed.

In this chart an uptrend can be clearly seen with trend lines being plotted to indicate this. In due course this uptrend fails and the upward trendline is broken and the market falls. Later on a candlestick known as a hammer can be seen which illustrates the buying is much stronger than selling which is typically indicative of a bullish pattern to follow.

Also, using Stochastics traders can use this tool to gauge whether the market is oversold or overbought, where an opportunity is presented in the chart. This occurred at the previous trendline mentioned which instead of providing support this trendline became resistance. When strong opportunities are presented traders can place stop loss orders closer to the market.